China’s Money Rate Jumps Most in 3 Weeks on Year-End Cash Demand

China’s money-market rate surged the most in three weeks on speculation cash supply will decline as banks hoard funds to meet year-end capital requirements and holiday withdrawals.

The People’s Bank of China added 33 billion yuan ($5.3 billion) to the financial system via 14-day reverse repurchase contracts at a yield of 3.45 percent, the same as at the last sale on Dec. 13, according to a trader required to bid at the auctions. It injected an additional 60 billion yuan for seven days at 3.35 percent, also unchanged, the trader said. China’s financial markets will remain shut from Jan. 1 through Jan. 3.

“As the year-end and the holiday draw near, banks are trying to meet regulatory and their own capital requirements,” said Song Qiuhong, a bond trader at Foshan Shunde Rural Commercial Bank Co. in Foshan, a city in the southern Guangdong province. “The market is going to be more volatile next week.”

The seven-day repurchase rate, which measures interbank funding availability, jumped 40 basis points to 3.45 percent as of 10:54 a.m. in Shanghai, the biggest increase since Nov. 28, according to a weighted average rate compiled by the National Interbank Funding Center.

The one-year swap rate, the fixed cost needed to receive the floating seven-day repurchase rate, rose two basis points to 3.37 percent, according to data compiled by Bloomberg.

The yield on the 2.94 percent government bond due October 2013 rose two basis points, or 0.02 percentage point, to 2.87 percent, according to the Interbank Funding Center.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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